Give and make: Bill Gates and Warren Buffett may be setting new records for individual charitable donations, but, as Scott Payton finds out, British firms are leading the world in engaging the philanthropic inclinations of their employees.
June 2008 will be an important month for Microsoft. Bill Gates is leaving his day-job at the software giant to focus full time on the charity he founded with his wife eight years ago. It's no ordinary charity: with an endowment worth more than 19bn [pounds sterling], the Bill & Melinda Gates Foundation is the largest philanthropic organisation in the world. Its biggest donor to date has been legendary investor Warren Buffett, recently named as the world's richest man. Buffett has pledged more than 15bn [pounds sterling] of shares in his company, Berkshire Hathaway, to the foundation.
Does such colossal generosity reflect a wider global increase in charitable giving? And how does philanthropy vary in scale and scope from country to country and between business and personal donations?
The trend set by Gates and his friend Buffett is certainly being followed by the super-rich elsewhere in the world. "It is leading others who have sizeable wealth to consider charitable donations as part of their overall financial planning," says Andrea Van-Sittart, head of company relations at the UK-based Charities Aid Foundation (CAF).
Last year, for example, Scotland's wealthiest man, private equity guru Sir Tom Hunter, pledged 1bn [pounds sterling] to charity. Meanwhile, the Virgin Group's chairman, Sir Richard Branson, promised to donate 1.6bn [pounds sterling] over ten years to research projects aimed at tackling global warming.
But it's not only rich individuals who are giving away big chunks of wealth. Some of the world's most profitable companies are also increasing the portion of income that they give to good causes. Mobile telecoms company Vodafone is donating 24m [pounds sterling] this year through the Vodafone Group Foundation, established in 2002. The foundation is the hub of an international corporate philanthropy network, donating money to 24 charities around the world. Each is run by a local company in which Vodafone has a significant stake. These firms add their own donations, taking the total raised last year over the 38m [pounds sterling] mark.
"We don't know of any other corporate foundation that has such a global footprint," says Andrew Dunnett, the foundation's director. "There is a huge diversity of need in the communities in which we operate, so the local trustees decide which are the most pressing causes."
These causes range from disaster relief and support for homeless and disabled people to funding for sport and the arts. In all, Vodafone has donated more than 100m [pounds sterling] over the past six years. It is the biggest corporate donor to both Oxfam and the United Nations Foundation.
The benefits to those receiving the cash are clear, but what does the donor get out of it? For one thing, it wins the respect of its staff, according to Dunnett. "We have 67,000 employees worldwide. They expect the company to invest in the communities in which it operates," he says.
Catherine Sermon, community impact director at the UK not-for-profit organisation Business in the Community, says this is a familiar story. "We have evidence showing that when companies engage in this kind of activity, employees think more highly of them," she explains (see panel opposite page).
Corporate philanthropy initiatives can also be a powerful recruitment tool. "Graduates are getting increasingly interested in how companies conduct their charitable giving," Van-Sittart says. "This area can be extremely important in the war for talent."
One employee who is benefiting from his firm's charity programme is Benoit Vauchy, a principal at private equity behemoth Permira. In 2005 the company teamed up with UK charity the Community Action Network to launch Breakthrough, a programme designed to invest money and private equity expertise into developing "social enterprises", a recently coined term for business-like organisations that have a social purpose.
"We are trying to do with social enterprises what we do with our commercial enterprises: accompanying them during their phases of transformation and growth," Vauchy says.
The first Breakthrough social investment fund was worth more than 750,000 [pounds sterling]. Five social enterprises benefited: FareShare, Law For All, Training For Life, Green-Works and TimeBank. Permira recently invested a further 1.5m [pounds sterling] into a second fund, Breakthrough II, which is also open to other investors. The goal is to raise 5m [pounds sterling] to fund up to 15 social enterprises.
Permira's employees are encouraged to spend time helping Breakthrough's social enterprises during working hours. "I find that very attractive," Vauchy says. "Given the number of hours we work, we would normally tend to donate money but not time, so this is a great opportunity. It teaches us a lot about managing a small business."
The learning process goes both ways. FareShare specialises in food management. It aims to reduce the amount of food that's thrown away and distributes it to those who need it most. FareShare's chief executive, Tony Lowe, receives advice from Permira's Jean-Philippe Barade, who is currently managing Igloo Birds Eye Frozen Foods.
"We talk through our business plan and the figures and discuss new initiatives. His level-headed business approach is really helpful," Lowe says.
"This initiative is about bringing top-quality expertise into the social sector," says Adele Blakebrough, who co-founded the Community Action Network and set up the Breakthrough programme with Permira.
Breakthrough is one of a growing number of examples of collaboration between the private and third sectors--something that distinguishes many modern philanthropic corporate programmes from the "old-fashioned patronage" of the past, according to Sermon. "Yes, the voluntary sector still needs core funding, but it also needs to work in partnership with the private sector," she says.
Both Permira's and Vodafone's charity programmes also highlight what Sermon cites as another key recent trend in corporate philanthropy: it is getting much better organised. "Charitable activity used to be a very ad-hoc affair," she says. "The charitable donations budget was often directed at the whim of the chairman or his wife."
This has changed as corporate social responsibility has risen up the business agenda. "Companies are trying to make sense of their position in the community and translating that into how they operate through charitable contributions and employee engagement activities," Van-Sittart says.
Business in the Community is designed to help firms achieve this alignment of business goals with philanthropic activity. "For example, a large food manufacturer could devote its efforts towards activities that benefit health, wellbeing and the communities in locations where its main operations are based," Sermon says.
Sainsbury's, meanwhile, runs the Active Kids programme, which raises money for sports and exercise equipment in local schools. Shoppers receive Active Kids vouchers when they pay for their groceries. They then choose which schools will redeem these vouchers. It's proved hugely successful: 85 per cent of UK schools are registered and each participating primary school received 750 [pounds sterling] worth of sports equipment from Sainsbury's in 2006--three and a half times more than their average total PE equipment budget. In 2007 the scheme raised 18m [pounds sterling].
While Sainsbury's has come up with a powerful way to engage customers in fundraising, Tesco has mastered the art of engaging employees. Its 450,000 employees vote for the company's charity of the year (currently Marie Curie Cancer Care) and the supermarket also sponsors Cancer Research UK's Race for Life. Almost 22,000 Tesco staff took part in the race last year.
So how does business and individual philanthropy vary by country? "The UK definitely leads the world in terms of the levels of understanding and engagement of businesses in this area. A lot of global companies that we work with are rolling out their UK programmes internationally," says Sermon, who offers US retailer Avon's breast cancer programme as an example. "This started in the UK in the early nineties, but now operates around the world."
But in terms of the scale of personal charity donations, the US leads the world by a country mile. According to a 2006 study by the CAF (see chart, page 20), total charitable donations in the US made up 1.67 per cent of the country's GDP, compared with 0.73 per cent for the UK--a figure that still puts the UK in second place in the charitable league table, followed by Canada, Australia and South Africa.
Why are Americans more generous? One reason, according to Van-Sittart, is the cultural attitude towards giving in the workplace. "In many US companies the concept of employee giving is introduced as soon as someone joins an organisation. It's almost culturally unacceptable not to participate," she explains. "In the UK, people are much more reserved about charitable giving and much more understated in terms of the choices they give to employees."
Another frequently cited reason for high levels of philanthropy in the US is the country's lack of a European-style welfare state. "The US has always depended on wealthy people to provide community services," says Louisa Mitchell, the author of a report on philanthropy in the UK financial services sector recently published by the Policy Exchange, a right-of-centre think-tank.
The CAF study found an inverse relationship between the levels of social security contributions and charitable donations in Europe, too. "The higher the social security contributions, the less is donated to charity; and the lower the social security contributions, the greater the donations to charity," the report's authors conclude. This, they argue, helps to explain why charitable donations are lower in France and the Netherlands, where social security rates are high, than they are in Ireland and the UK.
A further reason why people in the US donate so much is the popularity of giving to religious organisations. According to the CAF study, more than a third of all US donations go to religious causes, compared with only 13 per cent in the UK. But, as the report points out, even if religious giving is taken out of the equation, US donations still outstrip those of the UK by 0.4 percentage points in terms of GDP share.
So what can be done to increase individual donations in countries where they are relatively low? "There needs to be a total change of culture," Mitchell says. One effective incentive to charitable giving in the UK is tax breaks. "People who do give really understand this," she points out.
But employers could do far more to make philanthropy easier. Mitchell's report recommends that companies provide "charitable accounts" so that employees can make donations automatically on pay day. "Companies can then scale this system up to establish their own private foundations," she says.
Mitchell cites investment bank Goldman Sachs as a leader in this area because it offers legal and other support to partners who want to set up a charitable foundation. "Goldman Sachs does all the administration and the partner simply decides where they want the money to go. This kind of corporate support for individual giving is pretty scant at the moment," she says.
When it was launched in November 2007, the Goldman Sachs Gives initiative was worth 64m [pounds sterling], with the firm contributing 25m [pounds sterling] of this figure. It also has a "matching gift" programme, in which it promises to match employee donations of up to 10,000 [pounds sterling].
In total, Goldman Sachs and its affiliates donated more than 50m [pounds sterling] to charities worldwide last year (see the chart below for a breakdown of donations). Emma Turner is executive director of the firm's charitable services group for the EMEA region. She has the following advice for other firms seeking to make their philanthropic activities a success:
* "Be realistic.
* Start small and increase the scope of your projects over time.
* Work out what your organisation wants to achieve, as well as what it has to offer the community, and work with the beneficiaries to ensure that they benefit in a productive way.
* Make sure that your employees understand these goals and that you are in this for the long term.
* Obtain endorsement from the top of the business and make sure that senior executives participate.
* Tailor programmes to the local community so that they vary from country to country and from region to region.
* Never make a promise you can't keep."
At the World Economic Forum in Davos earlier this year, Bill Gates, in one of his last major speeches before leaving Microsoft, had a final philanthropic clarion call for business leaders: "We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well."
Causes and effects
The business benefits of employee volunteering and charitable donations:
43% of employees who were helped to volunteer in their communities by their employers said that it made them feel more committed to their companies.
(Source: Research International and Business in the Community, 2006.)
98% of consumers in the UK and US are aware of at least one product linked to a charity or good cause.
(Source: Business in the Community, Research International, Lightspeed Research and dunnhumby, 2004.)
76% of employees who are involved in community work say that they are "highly" or "somewhat" satisfied with their jobs, compared with 60 per cent of employees who are not actively involved in community work.
(Source: Research International, 2006.)
47% of customers who are aware of a company's cause-related marketing activities say they feel comfortable with that organisation, compared with 21 per cent of those who are not aware of such activities. (Source: Research International, 2003.)
Scott Payton is a freelance business journalist and editor.
National giving as a percentage of GDP Source: Charities Aid Foundation, November 2006. "The sample covers all the largest donor countries in terms of amounts given. Together their economies represent almost 53 per cent of global GDP." USA 1.67 UK 0.73 Canada 0.72 Australia 0.69 South Africa 0.64 Ireland 0.47 Netherlands 0.45 Singapore 0.29 New Zealand 0.29 Turkey 0.23 Germany 0.22 France 0.14 Note: Table made from bar graph. Goldman Sachs' charitable giving in 2007 Goldman Sachs and its affiliates donated about 50m [pounds sterling] to charitable causes last year. Here's how the money was divided: Human services 25.6% Other 1.7% Health and hospitals 9.5% Environment 3.7% Arts and culture 15.7% Civic and community 19.9% Education 23.9% Note: Table made from pie chart.
|Printer friendly Cite/link Email Feedback|
|Publication:||Financial Management (UK)|
|Article Type:||Company overview|
|Date:||Apr 1, 2008|
|Previous Article:||Trust fund: politicians will never win our confidence if the lack of transparency concerning their expenses--and the feeble sanctions against MPs who...|
|Next Article:||Thorough counsel: when Nathan Elvery became FD at the London Borough of Croydon n 2004, the job of restoring its finances must have seemed like...|